Tadawul margin financing substantially improving YTD: Derayah Financial CEO

Mohammed AlShammasi, CEO of Derayah Financial

Margin financing in the Saudi Exchange (Tadawul) has been substantially improving year-to-date (YTD), backed by investors’ strong appetite for new investment positions at long-term lucrative prices, Mohammed AlShammasi, CEO of Derayah Financial, told Argaam on the sidelines of Saudi Capital Market Forum 2023.

Derayah Financial has a significant market share with a big margin loan portfolio. The company has witnessed huge demand for margin financing YTD, which led to an expansion through injecting increased funds.

The Saudi market significantly retreated from the 14,000-point level to the 10,000- point level. However, this allows investors to enter new business sectors and build positions in the long term, especially as many heavyweight sectors witnessed steep declines like banks and petrochemicals.

AlShammasi indicated that the Saudi market got off to a good start this year, expecting liquidity to recover as it has not reached last year’s levels yet.

He also forecast the monetary tightening policy to end soon post the Federal Reserve’s decision to raise the benchmark rate by 0.25%.

The stock market has been witnessing huge challenges since H2 2022, on the back of a policy rate hike. This is in addition to a rise in the prices of different commodities and services worldwide, which pushed central banks to take precautions to wrestle soaring inflation.

AlShammasi pointed out that the monetary tightening policy led to a remarkable decline in the global stock markets as well as the liquidity levels. Consequently, investors resorted to the lower-risk investment instruments like deposits, bonds, sukuk and the like, which were not as attractive for long years.

He also noted that prices of services and commodities, together with the inflation levels, started to relatively head downwards. He expected global economies to see lower inflation rates over the coming period.